Covered Calls

Resources

Getting Started

Daily Newsletter, Tuesday, 08/05/2003

HAVING TROUBLE PRINTING?

PremierInvestor.net Newsletter Tuesday 08-05-2003
section 1 of 2
Copyright 2003, All rights reserved.
Redistribution in any form is strictly prohibited.
The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================
In section one:
Market Wrap: Close, Very Close
Watch List: KG, FLR, AMGN, MME and more!
Market Sentiment: Personal Indicators
=================================================================
MARKET WRAP (view in courier font for table alignment)
=================================================================
08-05-2003 High Low Volume Advance/Decline
DJIA 9036.32 -149.70 9187.73 9034.57 1.55 bln 1020/2197
NASDAQ 1673.50 - 40.60 1711.11 1671.04 1.72 bln 1086/2130
S&P 100 486.66 - 8.84 496.03 486.52 Totals 2806/4327
S&P 500 965.46 - 17.36 982.82 964.97
W5000 9306.25 -158.00 9464.20 9302.01
RUS 2000 457.45 - 7.32 464.77 457.08
DJ TRANS 2544.59 - 30.50 2577.53 2540.29
VIX 24.11 + 1.46 24.12 22.66
VXN 34.23 + 1.58 34.82 33.37
Total Volume 3,562M
Total UpVol 695M
Total DnVol 2,828M
52wk Highs 213
52wk Lows 110
TRIN 2.34
NAZTRIN 1.76
PUT/CALL 0.95
=================================================================
===========
Market Wrap
===========
Close, Very Close
The markets ignored positive economic data and plunged to end
very close to major support levels. Bonds fell and yields rose
after a lackluster treasury auction and there are two more
days of auctions to come. Cisco disappoints after the close
and warns that while business is not getting worse it is also
not getting any better. Are we having fun yet?
Dow Chart
Nasdaq Chart
S&P Chart
The morning started out well with Chain Store Sales rebounding
from last weeks drop by +0.8%. Tax rebate checks are making it
to the stores and six southern states had tax holidays to boost
spending. The results were excellent and with school starting
early the shoppers were out in force. Considering average
selling prices have dropped -4% due to heavy discounting this
means sales were actually heavier than reported. Inventory is
being pushed out the doors and retailers are starting to
breathe easier.
Also beating estimates by a mile was the ISM Services Index
which soared to 65.1 when estimates were only 58. This was the
highest level since the index began and the biggest jump in
six years. This represents a 10-point increase in just two
months. New orders jumped to 66.9 from 57.5 but prices fell
to 50.6 from 51.4 and employment barely budged to 50.7 from
50.3. The services numbers are not normally market movers due
to the manufacturing ISM, which comes out a week earlier. The
numbers today were no different. We had a spike on the report
but that spike was quickly sold and we ended much lower.
The only negative report of the day came from the Challenger
Layoff report, which saw a spike in announced layoffs for July
to 85,117 from 59,720 in June. The two-month decline ended
with a steep jump. The continued need to cut costs to preserve
earnings and higher productivity is taking its toll. However,
the current level for all 2003 is 12% less than the same level
at this point in 2002. Analysts tried to spin it as positive
by pointing to the much higher levels earlier in the year when
layoffs averaged over 100,000. I agree it was higher but I
think the dip corresponds to the "expected" post war bounce
which did not really appear. If employers held off cutting
employees in case there was a bounce they could be feeling
the pain of higher payrolls now without higher profits.
Hurting the markets at the open was a strong warning by Costco
which said lower margins due to falling prices and higher costs
would depress earnings for the current quarter. They did say
sales were improving but had been below plan for the last two
months. The stock was knocked for a -6.90 loss to $30.06 and
represented investor feelings about companies unable to squeeze
any more earnings out of their turnip.
Last night the Semiconductor Billings report showed that they
rose +0.3% in June. April was revised down to 1% from 2%. The
analysts tried to spin this minor gain as positive, the fourth
consecutive month of gains, but they neglected to mention that
it was also the smallest gain for those same four months. Flash
memory chips continue to supply the gains. The SOX was not
impressed and closed with a -12 point drop to 383.
Also helping contribute to the market slide was the financial
sector which is getting killed on the bond action. The $BKX.x
has dropped from 903 to 856 in only 3 days. The rebound from
yesterday was almost completely retraced and we are nearing
two month lows. With nearly 50% of the S&P either techs (27%)
or financials (22%) it is not surprising that it closed at
two month lows as well. The 50 DMA at 986 is well above the
965 close. With the futures trading at 959 overnight it appears
the cash index will test the July intraday low at 962.10 at the
open.
After the close Cisco reported earnings that were inline with
estimates but they had to stretch to do it. Cisco reported that
they bought back 424 million shares, 83 million in the last
quarter, which reduced their shares outstanding by -3.7%. They
also said they had $5.2 billion left in the current buyback
program. Without the share repurchase the EPS would have been
closer to +13 cents. There were several other warning signs.
Inventory rose to $873 million from $765 million. Gross margins
which had been expected to rise to 71% remained level at 70%
and Cisco said they would be dropping to 67-69% going forward.
Last quarter Cisco earned $982 million on revenue of $4.7
billion. In the same quarter last year Cisco earned $772
million on sales of $4.48 billion. There has been no top line
growth in a year and earnings have come primarily from cost
savings. Cisco said expenses could rise +2-3% in the current
quarter. That is a disguised way of saying that earnings may
fall over the next quarter. Sales declined over the prior
quarter by -2.6%. The company said it continued to see weak
demand and has yet to see a material increase in IT spending.
John Chambers tried to spin the results but analysts continue
to focus on terms like "continues to be a challenging
environment" and "Cisco will continue to curtail costs by
keeping a flat headcount." Analysts said that last statement
was an implied reduction in force due to attrition and other
factors. Cisco basically said on the conference call that
they do not see the business environment getting any worse but
they also do not see it getting any better. Cisco was trading
down -$1.30 in after hours. Cisco's cash flow, which Chambers
normally touts as a measure of true strength fell to $1.55
billion from $1.61 billion for the same quarter in 2002. Cash
on hand dropped nearly a billion dollars. Accounts receivable
rose to 26 days compared to 21 days in 2002 and 23 days last
quarter. Every item is just slightly worse than it was before.
Not bad, just slightly worse, but analysts feel that the
cracks in the armor are beginning to show.
The bond market took yet another hit today. The government
auctioned off $24 billion in three year notes at a yield of
2.422%. The bid-to-cover ratio, a measure of demand, came in
weaker than expected at 1.32 vs the 1.96 ratio of the last
sale in May. There will be another $18 billion of 5-year notes
on Wednesday and another $18 billion of 10-year notes on
Thursday. This is not good news for the bond market despite
the fact the auction was expected for weeks. Considering the
selling in the bond market over the last six weeks, the lack
of interest in government paper and the potential for several
hundred billion more over the next several months the outlook
for rates is not good. Once the auction was over the 10-year
yield soared to close near the high of the day at 4.44%.
The stock market is not happy about this complete retracement
of the Monday bond bounce. It appears it was an oversold
reaction to the 100-year storm as Franklin Raines, the FNM CEO,
called it. The rumors are still flying that a big bond house
is in trouble and part of the Monday bounce was relief that
there was no failure announcement over the weekend. With yields
soaring and the market dropping, anyone in trouble last week
is likely in worse trouble today. The remaining auctions this
week are expected to drive prices down and yields up even
further. The one-day reprieve for the homebuilders disappeared
as they returned to close near the lows for the week.
It was not a good day for the markets despite the good economic
news. The Dow closed at 9036, just slightly over the critical
9000 level and well under its 50 DMA at 9100. The Nasdaq closed
at 1673 and only +5 points over the 50 DMA at 1668. This was
the lowest close for the Nasdaq since July 3rd. The S&P took
the biggest hit with a close at 965 and well below its 50 DMA
at 986. Other than the psychological support at 950 the next
major support level would be the 200 DMA at 940. For the
broadest market view the Wilshire-5000 closed at 9306. The 9300
level on the $TMW.x is directly equivalent to Dow 9000 and it
was the lowest close for the Wilshire since early July.
Wilshire Chart
To put it bluntly, if the Dow closes under 9000, the Wilshire
under 9300 and the S&P under 960 then the trend is over. The
constant rally by the markets in the face of bad news appears
to be over. They cannot even rally them on good news this week.
The implications are serious. I said on Sunday I was long term
bullish and short term bearish. My short term was two weeks
and it appears to be acting as expected. I have running email
conversations with a great many traders and market analysts
and almost without exception they are expecting a short term
drop. That may be a strong contrarian indicator in itself. As
traders we should look at it as a long term buying opportunity
developing not the end of the world. This is just a normal
profit taking cycle and a normal first week of August. It is
accelerated by the bond fiasco. It is also accelerated by the
options expiration next week and the extreme bullish move
since March. Even rumors about Saddam failed to bounce the
market this week. If we break Dow 9000 then my July target
of 8500 still stands as a worst case scenario. If you are
short I would be looking at the 200 DMA at 8730 as decent
support and an initial exit. Plan accordingly.
If the army of short term bearish traders I communicate with
are a bullish contrarian indicator then I have the perfect
contrarian bearish indicator. Ralph Acompora said on TV tonight
that we are in a cyclical bull market that should last through
2004 and the Dow could make a new all time high. For those with
short memories the Dow's high was 11,750 in Jan-2000, roughly
+2750 points above our current level and a +30% increase from
here. I hope he is right but considering Cisco's earnings
tonight I just think it might take a little longer and start
from a little lower.
Enter Very Passively, Exit Very Aggressively!
Jim Brown
==================================================================
WATCH LIST
==================================================================
The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks. Rather we would prefer to offer
it as an extra tool in today's investor toolbox. Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own. Due to time
constraints we do glance at the news but rarely do we have
time to fully read pertinent news stories, due background
research and other necessary screens that investors should do
before making a decision. A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's
happening in the broader market indices. We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.
STOCKS WORTH WATCHING
---------------------------------
King Pharmaceuticals - KG - close: 13.79 change: -0.21
WHAT TO WATCH: Breakdown in progress! While we're a bit late to
the party, KG looks to have room to fall from its recent break of
both the 50-dma and yesterday the $14.50 support level. A failed
rebound below that broken support should provide the best entries
and we're looking for a slide down to $12 support in the near
term.
---
Fluor Corp. - FLR - close: 32.80 change: -1.81
WHAT TO WATCH: After struggling with resistance at $36 for the
past four months, it looks like the bulls have given up and are
going to let shares of FLR break below support that has held
throughout that period. Use a trigger of $32.35 (just below the
3/27 low) and target an initial drop to the $30 level. Watch for
potential support near the 200-dma ($30.81) on the way down.
---
Amgen Inc. - AMGN - close: 66.17 change: -1.99
WHAT TO WATCH: Just last week we were looking for a bullish play
on AMGN on a rebound from the 50-dma. Things have changed a lot
over the past few days, as the stock plunged below that critical
measure on Tuesday. The trend appears to be changing, and we can
now use failed rallies below $68.50 to enter to the downside,
looking for a drop to the $62-64 area as weakness seems to be
intensifying across the whole Biotechnology sector.
---
Allergan Inc. - AGN - close: 76.94 change: -2.07
WHAT TO WATCH: AGN is another one we were viewing as bullish just
late last week, but the price action so far this week looks like
a pending breakdown. Look to enter on a break below $76 and
target a move down to the $70 level. Watch for potential support
in the $73-74 area, but with today's break of the 50-dma, the
bulls are less likely to jump in to defend the stock than they
were just a couple short weeks ago.
---
Mid Atlantic Medical - MME - close: 49.86 change: -3.67
WHAT TO WATCH: Holy Vertical Plunge, Batman! That's an awfully
big drop in shares of MME, losing more than 16% in just the past
5 sessions, but judging by magnitude of the drop, closing at the
low of the day and the heavy volume, there's more downside to
come. Today's break of the 50-dma appears critical and the bulls
will really struggle to get the stock back over the $54 level.
MME is probably due for an oversold rebound, and a failure of
that rebound below the 50-dma looks like the ideal entry for new
positions. Should the plunge continue unabated, the next visible
level of support is in the $47.50-48.00 area, so momentum traders
might be able to harvest a couple points between here and there
on a break below $49.50.
---
===================
On the RADAR Screen
===================
TREE $22.53 - Have you noticed the weakness in the Financial
stocks? Well it is picking up steam and that can be seen in
Tuesday's 7.5% slide in TREE that smashed through the 50-dma. A
failed rebound below the 50-dma offers the best entry, while a
break under $22 should have the stock vulnerable to the $20
level, near what had been strong support in early May.
RCII $67.48 - Just when it looks like RCII can't fall any
further, along comes another big red candle. The stock is now
well off its highs of just a couple weeks ago and looks like it
will keep falling at least until it reaches strong support near
$63. A failed rebound below $70 should offer the best entries
ahead of the next plunge.
IBM $79.85 - Shares of Big Blue have been picking up steam to the
downside over the past week and on Tuesday punctured the $80
level for the first time in nearly two months. Downside
continuation should have the $75 level in play, with the 200-dma
now providing solid overhead resistance.
===============================
Market Sentiment
===============================
Personal Indicators
Jonathan Levinson
The spectacular sell off into the close following weeks of
seemingly endless range bound trading has toppled a number of
indicators and done severe technical damage to the charts. It's
an excellent opportunity to reflect on our own reactions to the
tape and the effectiveness of our trades.
While each indicator provides an accurate snapshot of a different
facet of the market, and combinations thereof provide a broader-
but-still-partial picture of same, the live tape presents a
real-time challenge to traders. The indicators dance and change
at often inconstant rates, leaving it up to traders to interpret
their messages and make often huge decisions on the fly.
The task is too complex for most traders to reduce to a
consistently reliable mechanical system, although many do. For
this reason, the richest traders, institutions, rely increasingly
on robots to do their trading, seeking an edge in increasing
complexity. For most of us, however, we operate live and rely on
"gut" feel and experience to guide our trades. For this reason,
it is essential to be consistent, and to know when we're not "in
the zone." The range bound trading of the past weeks has been
treacherous, with huge, sudden moves often separated by days of
slow, minute range bound action. A steady, detached view of the
tape and its indicators is a prerequisite to consistent, safe
and successful trades, as is a rapid awareness of when one's not
in that state.
As we see what appears this afternoon from many indicators to be
the confirmation of a new downtrend, we should be attentive to
our own internal indicators. It's likely that there will be
bigger swings and shorter-duration ranges as volatility climbs
and the bulls awaken from their pleasant reverie.
-----------------------------------------------------------------
Market Averages
DJIA ($INDU)
52-week High: 9361
52-week Low : 7197
Current : 9036
Moving Averages:
(Simple)
10-dma: 9187
50-dma: 9099
200-dma: 8537
S&P 500 ($SPX)
52-week High: 1015
52-week Low : 768
Current : 965
Moving Averages:
(Simple)
10-dma: 986
50-dma: 986
200-dma: 911
Nasdaq-100 ($NDX)
52-week High: 1316
52-week Low : 795
Current : 1229
Moving Averages:
(Simple)
10-dma: 1265
50-dma: 1238
200-dma: 1091
-----------------------------------------------------------------
Is this it? After months of floating aimlessly above the 20 level
are we finally seeing a move and some follow through in the VIX?
Traditionally drops toward the 20 level (and under) in the VIX signal
market tops. The reversals aren't usually immediate and we've seen the
same here. However, the sharp move higher in the value of the VIX
suggest that traders are more willing to pay higher premiums on put
options, which indicates a rise in fear. A move over 25.00 could be
significant in that it would mark definite change in investor
psychology.
CBOE Market Volatility Index (VIX) = 24.11 +1.46
Nasdaq-100 Volatility Index (VXN) = 34.23 +1.58
-----------------------------------------------------------------
Put/Call Ratio Call Volume Put Volume
Total 0.95 526,874 501,760
Equity Only 0.81 409,330 331,713
OEX 0.66 34,593 22,974
QQQ 1.65 44,430 73,175
-----------------------------------------------------------------
Bullish Percent Data
Current Change Status
NYSE 68.4 - 1 Bull Confirmed
NASDAQ-100 70.0 - 5 Bull Confirmed
Dow Indust. 80.0 + 5 Bull Correction
S&P 500 74.8 - 1 Bull Correction
S&P 100 81.0 - 1 Bull Confirmed
Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart. Readings above 70 are considered overbought, and readings
below 30 are considered oversold.
Bull Confirmed - Aggressively long
Bull Alert - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert - Take defensive action if long
Bear Confirmed - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend
-----------------------------------------------------------------
5-Day Arms Index 1.22
10-Day Arms Index 1.13
21-Day Arms Index 1.05
55-Day Arms Index 1.14
Extreme readings above 1.5 are bullish, and readings below .85
are bearish. These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.
-----------------------------------------------------------------
Market Internals
-NYSE- -NASDAQ-
Advancers 847 999
Decliners 1971 2038
New Highs 45 79
New Lows 69 10
Up Volume 240M 389M
Down Vol. 1257M 1337M
Total Vol. 1518M 1736
M = millions
-----------------------------------------------------------------
Commitments Of Traders Report: 07/29/03
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.
Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.
S&P 500
Still looking at a lack of major change in the large S&P futures
contracts. Commercial traders and small traders have yet to make
any big moves lately.
Commercials Long Short Net % Of OI
07/08/03 415,053 453,720 (38,667) (4.5%)
07/15/03 414,020 453,033 (39,013) (4.5%)
07/22/03 411,206 442,131 (30,925) (3.6%)
07/29/03 405,429 445,114 (39,685) (4.7%)
Most bearish reading of the year: (111,956) - 3/06/02
Most bullish reading of the year: 18,486 - 6/17/03
Small Traders Long Short Net % of OI
07/08/03 152,239 74,749 77,490 34.2%
07/15/03 148,716 70,279 78,437 35.8%
07/22/03 155,891 76,466 79,425 34.2%
07/29/03 155,216 73,030 82,186 36.0%
Most bearish reading of the year: (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02
E-MINI S&P 500
Quite the opposite of the large S&P futures above, we're seeing
some big differences in the e-mini positions. Commercial traders
have turned very bullish while the small traders is increasing
their net bearish positions. These are new milestones for both.
Commercials Long Short Net % Of OI
07/08/03 192,815 224,124 (31,309) ( 7.5%)
07/15/03 214,274 218,765 ( 4,491) ( 1.0%)
07/22/03 249,392 249,386 6 0.0%
07/29/03 272,659 216,166 56,493 11.6%
Most bearish reading of the year: (354,835) - 06/17/03
Most bullish reading of the year: 56,493 - 07/29/03
Small Traders Long Short Net % of OI
07/08/03 56,394 72,090 (15,696) (12.2%)
07/15/03 45,372 54,654 (9,282) (9.3%)
07/22/03 45,945 76,071 (30,126) (24.7%)
07/29/03 44,437 93,144 (48,707) (35.4%)
Most bearish reading of the year: (48,707) - 07/29/03
Most bullish reading of the year: 449,310 - 06/10/03
NASDAQ-100
There is very little change in positions for either the
small trader or the commercials.
Commercials Long Short Net % of OI
07/08/03 30,489 48,311 (17,822) (22.6%)
07/15/03 28,467 49,154 (20,687) (26.7%)
07/22/03 32,502 48,139 (15,637) (19.4%)
07/29/03 31,456 50,294 (18,838) (23.0%)
Most bearish reading of the year: (20,687) - 07/15/03
Most bullish reading of the year: 9,068 - 06/11/02
Small Traders Long Short Net % of OI
07/08/03 26,136 9,035 17,101 48.6%
07/15/03 26,489 8,004 18,485 53.6%
07/22/03 27,321 8,844 18,477 51.1%
07/29/03 25,691 7,810 17,881 53.4%
Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year: 19,088 - 01/21/02
DOW JONES INDUSTRIAL
It's the same story here. Maybe it's the summer doldrums
that's leaving the size of futures positions in a very sideways
trend.
Commercials Long Short Net % of OI
07/08/03 20,752 11,860 8,892 27.3%
07/15/03 21,607 7,855 13,752 46.7%
07/22/03 22,198 8,176 14,022 46.2%
07/29/03 23,696 9,572 14,124 42.5%
Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 15,135 - 10/16/01
Small Traders Long Short Net % of OI
07/08/03 5,005 8,093 (3,088) (23.6%)
07/15/03 5,475 9,717 (4,242) (27.9%)
07/22/03 6,110 10,898 (4,788) (28.2%)
07/29/03 5,744 11,601 (5,857) (33.8%)
Most bearish reading of the year: (8,777) - 10/12/01
Most bullish reading of the year: 1,909 - 1/16/01
-----------------------------------------------------------------
=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================
This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.
Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html
*****************************************************************
ADVERTISING INFORMATION
For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.
*****************************************************************
Copyright ) 2003 PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

PremierInvestor.net Newsletter Tuesday 08-05-2003
section 2 of 2
Copyright ) 2003, All rights reserved.
Redistribution in any form is strictly prohibited.
The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================
Play of the Day: Weakening Financials
Stop Loss Update: BEAS
Closed Play: MU
Trading Ideas
Value Plays With Bullish Signals
Breakout to Upside (Stocks $5 to $20)
Breakout to Upside (Stocks over $20)
Breakout to Downside (Stocks over $20)
Recently Overbought With Bearish Signals (Stocks over $20)
=================================================================
Play-of-the-Day ( bearish )
===============
J.P. Morgan Chase - JPM - cls: 32.76 chng: -0.97 stop: 35.25*new*
Company Description:
JPMorgan Chase & Co. is a global financial services firm with
operations in over 60 countries. The Company's principal bank
subsidiaries are The Chase Manhattan Bank, Morgan Guaranty Trust
Company and Chase Manhattan Bank USA, National Association. Its
principal non-bank subsidiaries are its investment bank
subsidiaries, Chase Securities Inc. (CSI) and J.P. Morgan
Securities Inc. (JPMSI). The bank and non-bank subsidiaries of
JPMorgan Chase operate nationally, as well as through overseas
branches and subsidiaries, representative offices and affiliated
banks.
Why we like it:
If you've been following the Brokerage stocks like we have lately,
you noticed the big violation on Friday. The Broker/Dealer index
(XBD.X) finally broke below the $550 support level that had been
propping it up since early July. After the initial violation
early in the day, the XBD continued downwards, adding to the
validity of the breakdown. JPM caught our attention due to the
way it has been trading sideways in the $33-36 area (except for
the brief spike surrounding earnings, which was clearly a bull
trap) since the breakout in early June. Friday's 4.8% selloff on
volume that more than doubled the ADV certainly looks bearish, and
the violation of the 50-dma ($33.89) increases the likelihood that
this is the beginning of an extended move. Believe it or not
though, the stock hasn't yet truly broken down. Critical support
on the candle chart is at $33, and we're going to use a trigger at
that level. Adding to the significance of that level is the PnF
chart, which will issue a new Sell signal on a trade at $33 and
bring with it a tentative vertical count of $25.
Looking at the standard candle chart though, we can see that there
is likely to be some solid support near $30-31, reinforced by the
200-dma (currently $29.53). Once below that support though, JPM
ought to seek out strong support in the $27-28 area, which had
been strong resistance until the breakout in late April. Since
we're using an entry trigger at $33, we should be safe to set our
initial stop at $35.85, just above last week's intraday highs.
Aggressive traders will want to enter on the initial breakdown,
while more conservative players may want to wait for the
subsequent oversold rebound to enter on a rollover near the $34
level, which is just above the 50-dma, both of which should now
act as resistance.
Why This is our Play of the Day
As bond yields continue to rise, investors seem to be losing faith
in Financial stocks. Fears are still running rampant that there
is an impending disaster from a major firm that got caught flat-
footed by the sharp decline in bonds. Whether that is the root
cause of the weakness in Banking and Brokerage stocks remains to
be seen, as it could be nothing more than the normal August market
weakness. The fact remains that the Brokerage index (XBD.X)
continued its breakdown on Tuesday, slicing through its 50-dma
($539) and appears headed for a retest of major support near $510.
Concurrently, our JPM play slid below the $33 level again on
Tuesday, but in contrast to Monday's action, there was no rebound
and the stock closed below that level for the first time since the
end of May. While there is the possibility for a rebound from the
$32 area, it looks like that was what we saw with yesterday's
afternoon rebound and JPM should now seek out next support in the
$30-31 area. Resistance should now be formidable in the $33.50-
34.00 area and failed rebounds below that level can be used to
open new positions. We're still playing cautious with our stop,
inching it slightly lower to $35.35 tonight, which is just above
the rolling-lower 20-dma ($35.13).
Annotated Chart of JPM:
Picked on July 30th at $33.36
Change since picked -0.60
Earnings Date 10/15/03 (unconfirmed)
Average Daily Volume = 9.72 mln
=================================================================
Stop Loss Updates
=================================================================
BEAS - We are raising our stop loss on our current high risk/reward
long play from $12.65 to $12.74.
=================================================================
Tech Stock - Net Bulls
=================================================================
============
Closed Plays
============
--------------------
Closed Bullish Plays
--------------------
Micron Technology - MU - close: 14.23 change: -0.59 stop: 14.20
Despite what looked like a nice rebound from support last week,
shares of MU have not had a good start this week. Yesterday's
drop back to the 10-dma looked manageable, but today's 4% loss,
with the Semiconductor index (SOX.X) losing 3% was just too much
to stomach. Over the weekend, we had raised our stop to $14.20,
just below the 20-dma (currently $14.38). Today's selling
slammed the stock down through that moving average to tap an
intraday low of $14.17 and trigger our stop at the close. With
daily Stochastics tipping bearish again, we clearly want to be
out of the play, as the bears appear to be gaining the upper hand
and the SOX looks poised to finally break down out of its
ascending channel on Wednesday. Traders still holding open
positions will want to take advantage of any early strength
tomorrow to gain a more favorable exit, as the bullish prospects
for MU are looking dim tonight.
Picked on July 23rd at $15.38
Change since picked -1.15
Earnings Date 9/17/03 (unconfirmed)
Average Daily Volume = 11.4 mln
==================
Trading Ideas
==================
This section contains stocks that meet criteria which may make
them of interest to long and short side traders. These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential. However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.
Value Plays With Bullish Signals
---------------------------------
Ticker Company Name Close Change
MET Metlife Inc 27.99 +0.63
HU Hudson United Bancorp 38.59 +2.86
CYD China Yuchain Intl Ltd 11.78 +2.03
---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------
RIMG Rimage Corp 14.85 +1.26
---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
HSIC Henry Schein Inc 59.32 +2.57
STCR Starcraft Corp 28.76 +3.77
-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------
IACI Interactive Corp 36.48 -3.02
COST Costco Wholesale 30.06 -6.90
HIT Hitachi Ltd 41.90 -2.20
FE First Energy 31.33 -2.92
AET Aetna Inc 57.67 -4.29
OHP Oxford Health 39.06 -3.26
HNT Healthnet Inc 30.40 -2.80
CEPH Cephalon Inc 45.05 -3.14
RCII Rent-A-Center 67.48 -2.49
MME Mid-Atlantic Med Service 49.86 -3.67
-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-------------------------------------------
APD Air Products & Chemicals 44.92 -1.03
TXT Textron Inc 42.06 -0.95
VFC VF Corp 36.89 -1.01
EYE VISX Inc 20.35 -1.71
=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================
This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.
Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html
*****************************************************************
ADVERTISING INFORMATION
For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.
*****************************************************************
Copyright 2003 PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a
Broker/Dealer. Readers are advised that all information is issued
solely for informational purposes and is not to be construed as an
offer to sell or the solicitation of an offer to buy, nor is it to be
construed as a recommendation to buy, hold or sell (short or
otherwise) any security. All opinions, analyses and information
included herein are based on sources believed to be reliable and
written in good faith, but no representation or warranty of any kind,
expressed or implied, is made including but not limited to any
representation or warranty concerning accuracy, completeness,
correctness, timeliness or appropriateness. In addition, we do not
necessarily update such opinions, analysis or information. Owners,
employees and writers may have long or short positions in the
securities that are discussed.

Readers are urged to consult with their own independent financial
advisors with respect to any investment. All information contained in
this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please
add "support@optioninvestor.com"